Mizuho Research Institute recently released a survey report on how EC affects consumer prices in Japan. The EC market scale of Japan reached 16.5 trillion JPY in 2017, and the EC rate was 6% of the total consumption, which was higher than before, according to Ministry of Economy, Trade and Industry. Also, the Ministry of Internal Affairs and Communication’s statistics shows the ratio of online expenditures have recently increased, reaching to 4% on average in the first four months of 2018.
Referring to so-called ‘Amazon Effect,’ which helps consumers compare prices on EC sites, the Mizuho’s survey says that the effect possibly becomes a pressure to reduce Consumer Price Index (CPI).
Mizuho researched how an increase in online expenditures can affect consumer prices of consumable goods, such as foods, furniture, clothes, shoes, books or household goods, and service products including travel products. As a result, a 1% increase in online expenditure on a year-on-year basis resulted in a 0.1% decrease in consumer price in the case of travel products. In the case of consumable goods, the result was a 0.2% decrease.
The survey report says that Amazon Effect may bring about slower pass-along although rise in prices is usually and easily reflected by rises in labor costs and material costs.
In the meantime, the Mizuho reports the future demand trend in the EC market. If the ratio of online shopping by 65 years old or older expands to around 60% of young online consumers, their online expenditures are expected to triple compared to today.
In addition, the report indicates that the EC market of older consumer can be boosted by spread of more friendly digital devices for older people and improvement of AI that recommends goods for older people, such as health care goods or theme-oriented travel products.